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Inside Washington (05/07/2010)

* WASHINGTON (5/10/10)--The Senate shot down a measure that would cap the size of the nation’s largest banks. The measure, by Sens. Sherrod Brown (D-Ohio) and Ted Kaufman (D-Del.), would have capped banks at 10% of the nation’s insured deposits. Banks’ nondeposit liabilities would have been limited to 2% of the nation’s gross domestic product and 3% for financial institutions that do not own a bank (American Banker May 7). Sen. Mark Warner (D-Va.) said that the cap was “not the appropriate restriction” because the existing regulatory reform bill already has a 10% total liability cap. Brown said his amendment was needed because institutions slated too big to fail are unfairly competitive in the market and too risky ... * WASHINGTON (5/10/10)--The U.S. was not ready for the financial crisis of 2007-2008 and underestimated its impact, according to Treasury Secretary Timothy Geithner and former Treasury Secretary Henry Paulson. Both testified before the Financial Crisis Inquiry Commission, which was appointed by Congress to determine the root of the crisis. Paulson said he knew of financial trouble when he took office in 2006 but was surprised by the severity of it (Reuters May 6). Geithner said there had been complacency in the financial system, which led participants and regulators to think they could handle the problems. If the government had acted more quickly to place constraints on risk-taking, the crisis would have been less severe, he said. Paulson added that he wished he’d been able to communicate with Americans better as to why the government bailouts were for them and not Wall Street. Also, Geithner warned against preventing banks from engaging in some risk-taking activity on behalf of customers ... * WASHINGTON (5/10/10)--The top Republican member of the House Financial Services Committee Friday proposed that the American public be given 30 days to review and comment upon the amended version of a financial regulatory reform bill prior to the U.S. Senate’s final vote on the package. Rep. Spencer Bachus, of Alabama, made the recommendation in letters sent to Senate Majority Leader Harry Reid (D-Nev.), Republican Leader Mitch McConnell, of Kentucky, and Sens. Christopher Dodd, of Connecticut, and Richard Shelby, of Alabama, the top Democrat and Republican, respectively, of the Senate Banking Committee. Bachus argued that the size and scope of the legislation “warrant a significant amount of transparency and time” for the public to read its content and assess its impact …